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Thursday, July 13, 2006

CCQ 12 Do We Need a Commerce Commission?

Broadstairs asks

Is there a need for bodies such as the Commerce Commission?

Now I originally posed this question as an example. What I was getting at here (and I hope Broadstairs agrees)is this. Is their really a necessity for a body to regulate anti competitive practices in a free economy?

The NZ Commerce Commission carries out various roles, administering the Fair Trading Act (unnecessary), regulating electricity and telecommunications (downright destructive) etc. All of the Commerce Commissions few legitimate roles could be carried out by the Ministry of Justice.

What I really despise the Commission for however are the competition regulating powers given to it by the Commerce Act.

The Commerce Commission has both an enforcement and adjudication role in relation to anti-competitive practices prohibited by Part II of the Commerce Act.

The Act:

prohibits behaviour that restricts competition; and

allows the Commission to authorise, on public benefit grounds, proposed anti-competitive practices that would lead to the substantial lessening of competition in a market.


This is destructive and dangerous stuff. It is based on the BIG MYTH of capitalism.

That unregulated free enterprise will inevitably lead to the existence and maintenance of monopolies and cartels.

People who believe this (and this includes many business people and even some ACT members), are quite happy for a body like the Commerce Commission to ban proposed business mergers and even order existing businesses to break up.

As this proposition is completely false, there is no need for such a body, or indeed for anti-trust legislation at all.

The one and only cause of harmful or enduring monopoly is government regulation.

If you look at the Internet, you will see probably the largest near free market on the planet. The Internet is a pan global "cyber economy" made up of millions of businesses, voluntary groups, individuals and activists, all vying for your attention, your money, your bank account details, your hot body or your support.

Where are the monopolies on the Internet? Marxist logic tells us that the Internet should be careering towards centralised control as big well financed sites squeeze out competition and begin to dominate the market.

The reality is the opposite. The Internet is highly de-centralised and very "democratic". There are millions of Blogs, anyone can set up a website and sell globally, great or crap writers can transmit their work to millions, political opinion of every shade can be disseminated with ease. No site is any better than what it is producing NOW. Great sites can be forgotten tomorrow if their standards drop. New talent can emerge overnight.

That is exactly how a true free market economy works. De-centralisation is the natural consequence of free markets-not monopoly.

Imagine if a government or the UN ever gets hold of the Internet and starts to regulate it.

Then you will see huge negative changes. Certain sites that toed certain lines would get government favour and/or contracts. Certain sites that were "objectionable" would find life being made very difficult for them.

Certain favoured companies and sites would start to get competitive advantage and others would follow their lead in order to secure similar advantage. You would have to "go along to get along".

State control of the Internet would cut competition, reduce diversity and encourage centralisation and monopoly.

That is exactly what happens in a socialist or mixed economy. Companies get big on government contracts (Fletcher's carrying out state construction contracts on cost plus 10% for example), government favours, concessions etc. This leads to very cosy and often corrupt state/private relationships forming, to the disadvantage of smaller, more honest or newer competitors.

While some small temporary monopolies many exist in a free economy (a single shop on a small island, an exclusive right to a new drug until the patent runs out), they are all vulnerable to competition at any time.

The only entities safe from "dog eat dog" competition are those in some way protected by the state's power to force compliance.

While some will always conspire to form cartels, this should not be illegal. If people want to be lazy and stupid, let them. By doing this, the carteleers only weaken themselves and become easy meat for the entrepeneurs who relish competition and never miss the smallest gap in the market place.

If Air NZ wants to join Qantas, let them. Just make sure you remove ALL legislative impediments to other airlines, Zeppelins, rocket ships, hovercraft or magic broomsticks entering the market.

Anti competitive law and hence, the Commerce Commission is totally unnecessary and counterproductive.

If you want to increase competion and make monopoly impossible, simply completely de-regulate the market and get government out of business.

5 Comments:

Blogger libertyscott said...

Excellent article Trevor. Of course Air NZ wants to join Qantas with its predominantly government appointed board while it is predominantly government owned. Post privatisation it might choose a different path than simply rolling over and not competing.

10:36 PM  
Anonymous Willie said...

The consistently funny thing about freedom vs the state - is that if Quantas & Air NZ do form their little agreement then when prices "inexplicably" begin to rise to unnacceptable levels and service drops, the culpability will be placed with the free market, not the bunch of compulsion touters trying to control us all.

It's just like the nonsense with the large profits from Auckland Airport. People don't realise that Auckland Airport is completely sheltered from competition at our expense.

10:07 AM  
Anonymous Anonymous said...

Interesting website with a lot of resources and detailed explanations.
»

12:22 PM  
Anonymous Anonymous said...

The problem with the internet is people like you can post rubbish like this. The inefficiencies the monoploised markets bring to an economy are enormous, and it is your obvious lack of understanding that lets you write such stupidity.

11:54 AM  
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6:12 PM  

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